Judgment Overturns Tribunals' Orders Mandating Section 14 SARFAESI Act Proceedings for Asset Possession
In a significant ruling, the Madhya Pradesh High Court has allowed UCO Bank to proceed with taking possession of secured assets without the mandatory intervention of the Chief Metropolitan Magistrate or District Magistrate under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The decision overturns previous rulings by the Debts Recovery Tribunal (DRT) and Debts Recovery Appellate Tribunal (DRAT) that required such assistance for asset possession.
The case involves UCO Bank and M/s Asha Oil Industries, which defaulted on a cash credit limit of Rs. 5 crores, leading to the classification of their loan account as a Non-Performing Asset (NPA) in 2018. The bank sought relief from the High Court after the tribunals ordered the restoration of physical possession of the mortgaged properties to the respondents and the return of money deposited by the auction purchaser.
The court, presided by Justices Anand Pathak and Pushpendra Yadav, clarified that the SARFAESI Act does not mandate secured creditors to resort to Section 14 proceedings unless resistance is encountered in taking possession. The judgment emphasized that possession can be taken by an authorized officer by issuing a possession notice under Rule 8 of the SARFAESI Act rules, without the borrower's presence.
This decision is rooted in the judgment of the Supreme Court in Standard Chartered Bank v. Noble Kumar, which outlined three methods for secured creditors to take possession, including direct possession without resistance. The ruling aims to prevent borrowers from exploiting procedural delays and ensure the effective enforcement of security interests.
Bottom Line:
SARFAESI Act, 2002 does not mandate secured creditors to seek assistance under Section 14 for taking possession of secured assets if possession can be taken without resistance.
Statutory provision(s): SARFAESI Act, 2002 Sections 13(4), 14; SARFAESI Act Rules 8(1), 8(2)
UCO Bank v. M/s Asha Oil Industries, (Madhya Pradesh)(DB)(Gwalior) : Law Finder Doc id # 2845211
